Herb Greenberg chatted on RealMoney.com Tuesday, November 7 at 3 p.m. EST.
Good afternoon and welcome to RealMoney's chat with Herb Greenberg. RealMoney will host chats to give you an opportunity to discuss the market with our columnists in real time.
Hi, all, I'm delighted to be here on another Election Day and a fabulous day in San Diego.
Herb, you once said some mildly negative things about Brocade I seem to recall. Do you have any current opinion? Is Fibre Channel the next bubble to burst? Is Brocade for real?
Thanks, but I've never written a negative word on Brocade. And the only fibre bubble that seemingly has burst was the bubble of Ancor and its supposed big biz with Sun. Ancor is expensive on a PE basis, but its believers believe CEO Greg Reyes will take it to the next level. That's as far as I go with this one.
Hi Herb, I got a question to you all the way from Estonia, Europe. What are your thoughts on Transmeta's IPO? When will gravity start affecting it?
Ha, everybody's favorite question today. I dunno! But what I do know is that it intrigues many of us how well the deal is doing WITHOUT IBM's help.
Herb, have you seen the TV ads for moissanite? Think they stand a chance of being the next cubic zirconia?
No, I haven't. For all of you who don't know moissanite is the fake diamond made by Charles and Colvard, which used to be known as c3 and which is distantly related to Cree.
Folks in the know say its fake diamonds are much better than cubic zirconia, but they're not cheap so my thought was always if you don't buy the real cheap stuff you might as well buy the real thing!
Hi Herb. Is Amazon going to fizzle next year?
Boy, wouldn't the shorts wish. I think Amazon will be forced, after Xmas, to rejiggle they're business strategy in a fairly major way. That's just a guess. Already you have the shutdown of Pets.com, which was an important part of their Amazon Commerce Network. And you cannot discount the competition they will get this Xmas from Wal-Mart and the other bricks & mortar guys. Remember, on the books front, Barnes & Noble is now letting customers buy online and return in the stores. That's a big plus.
Now that I've said that, I'll remind you that my family buys big on Amazon because they execute so well. But with that BIG debt, and future cash needs, this Xmas will tell the story. Interestingly, as the stock rose I know some shorts who lightened up on Amazon and switched to Yahoo, which they felt has other vulnerabilities.
How bad is that receivable thing at ARTG Herb? Ten millon bucks? Can there be a reason for it besides stuffing to make the Q??
Jim (Cramer), I have a call in the CFO who may be calling me back this very moment based on the beeps I keep getting on my phone. I think you always have to wonder why a company that supposedly is so hot, and which is about to do an offering for cash, would have to factor.
Now, these receivables that they're factoring have no recourse, meaning that ARTG loses all liability, but right now there doesn't appear to be any explanation. Also, you don't know which receivables were being factored...the new or the old. I look forward to talk with the CFO.
Hi Herb. What's your sense about Reg FD? Is it making the playing field more even?
It's making the playing field about as even as it will ever be, but the skeptic in me believes the big guys will find a new way to play the game. By that I mean they'll find a new way to get information. I believe they MUST close all breakout sessions at investment conferences or open them all to the press to even fully expect to keep proprietary info away from the chosen few.
Why does Handspring go up every day?
For the same reason it was going down everyday, Jim (Cramer)! It has a mind of its own. This has a huge retail following; shorts describe it as Iomega like from the old days. They can understand the product. But your guess is as good as mine because one of the chief arguments against the stock is that Hand is little more than a hardware company; they still pay royalties to Palm for the software.
Herb, another almost completely unreported aspect for AMZN is that they have been steadily moving their prices up lately. Few bargains there anymore....
Great point, Jim (Seymour), and they haven't been making a big deal about it, either. Very hush hush. This is how they make their margins look better or one way, at least. It's a double-edged sword. In the short-term they can get their margins higher; but prices can only go so high and then they're back to where they were!
Herb- Great work! What's the best way to scan 10Qs to identify problems? I remember reading some time ago how you overlayed a worksheet and filtered for key phrases. Is that true?
Yes, only on Microsoft word. You go to the tools function and then to track changes you'll have to figure it out from there. It's pretty easy. But it's something quite a few pros use.
We all know that the e-commerce stocks have been killed (justly), but don't you think that there are going to be survivors, either stand-alone or acquired, that people should look at? eToys is a clear leader, though unprofitable, it seems to have plenty of financing for now. Is it worth making a bet that some stocks like these will survive?
I don't get into stock picks but the only bet I would make, along those lines, if I were an investor with extra cash to play with would be to invest in a basket of those with the most cash, best brands and the greatest likelihood to either survive or be acquired.
Herbie, What do you think of ONIS. It looks highly overvalued to me in light of the telco cash problems and cutbacks
Ramz, sorry, not one I've paid attention to but perhaps I should!
Herb, the telco /dsl debacle reminds me of the 90"s S&L melt down. It has been so easy to make $$$ short if the company is leveraged and in telco/dsl...same as the real estate situation in the late 80's early 90's. So when do they vultures step in?
When they can get it for the very lowest price! Assuming there's something to get!
Herb, any update on SEAC?
No, Zal, but I've been watching it regularly. What a hoot. Seachange. That was the company that reported earnings that appeared to miss a quarter. Hey, the bulls love it; think it will win big in pay per view TV. The bears remind me it has competition. Next!
Do you think AMAT is fairly valued now? Could it be getting overshorted?
Those valuation questions are best left to the likes of Cramer and Seymour but there are still indications, from the channel, that the equipment guys could face pressure. But whether it goes lower from here? dunno.
You mentioned CVS' lack of free cash flow and sneaking in an extra week of sales, any new news?
Nope, other than that they've reported strong results and CVS shareholders keep writing me to call me an idiot! I have been swamped and haven't done the follow-up that I should but in my quick discussion with the bears their story hasn't changed...the story that the company's fundamentals could be better. I'll leave it at that and promise to get back to this in my column in short order.
Another question - economy is slowing, and with a delay companies are feeling this. So the growth rates will be falling even more. Nasdaq 2000 points?
I don't do market calls but I believe that the big hurdle (as I've been saying for quite some time) will be oil prices this winter. That's not a moot issue yet. What continues to puzzle me is that unemployment is so high, on the one hand, and that on the other hand there's so much evidence of a slowdown.
Speaking of IOM, it has some new products and the stock price is showing some life - anything there?
So I heard and saw. But honestly, I haven't gone back to take a look. And be careful here: So many investors want to cling to the hope that an old star will shine again. I'm not saying that can't happen, but in the world of so many stocks you can't help wonder why folks keep coming back to the same old ones!
Isn't Handspring product perceived as a great Christmas gift = good quarter?
I guess, but that's a concept and a story...not something strong on fundamentals. That is a trade, not an investment.
The pure fibre optics plays (like JDSU and Ciena) seem to be very expensive still consider the shrinking capex forecasts for the telcos. Why do you think that they have been able to continue to trade at such high valuations? I'd think that the smart money would be bailing as fast as they could by now?
It's a question I get lots, and a topic of lots of conversation with my sources. The answer: Nobody I know has a good answer. Ciena, especially, would appear vulnerable. But it is teflon like.
Hi, Two questions. 1. If EBITDA is a proxy for cash flow why include interest? 2. What are your shorts saying about GE's ability to turn things around at Honeywell?
On one too many folks hide behind Ebitda because they have too much debt and don't believe the interest should be included: Wrong.
On GE: Even the bears believe that GE will do a much better job with Honeywell. Hearing nothing negative on that.
Hi Herb. Yesterday's LHSP news on more (allegedly) shady accounting didn't do much to the stock. Is it done getting "revalued" or do your sources still think we'll get closer to zero? No positions, ever.
Sources still think more bad news will come out and the stock will fall. And speaking of LHSP, I was alerted just before this call that the Lernout message boards on Yahoo were claiming that I am no longer with TheStreet.com. That shows the intelligence of their information. Of course someone else wondered who I was, so I guess that shows that for a brief moment I was a legend in my own mind.
Is AMZN history and how does the PETS blow up effect it?
That's a good question and it's one I queried some analysts about today. Amazon does not have to write off any of these investments until they close their doors, so it would appear there would be a write-off. But the analysts say Amazon has not disclosed enough information about these deals for them to make a proper call on the effects of this situation. I would guess that in the scheme of things it will be relatively small. It's the principle that matters!
Herb, any thoughts on digital media, such as DVD?
Yep, I'm rethinking whether I really need to buy one!
Do you have anything on CLPA - Cell Pathways?
Nah, the stock got killed when its product didn't get FDA approval. This had been an over-hyped story. They'll probably go back for re-approval and the whole hype will start over again!
Herb - Did Cisco increase customer financing? Did it use Deferred Revenues to make the numbers?
keeps highlighting their accounting. Your thoughts.
I'm getting lots of questions on Cisco, especially why I haven't written anything about it. I have pretty much steered clear of it because I don't have an edge. It's SO widely covered. I'll leave this one to my buddy (Adam) Lashinsky. It's his. (We have that subtle division of labor internally UNLESS we have strong disagreement.) The company that I keep wishing I'd take a closer look at is Qualcomm, but again, I have no great edge and every time a bear thinks he/she has it nailed, THEY get nailed!
Herb, any follow up coming on Symbol Technologies? They have had a great run (+$8-9 share) since your article. Also, any truth to Motorola checking them out?
Nothing right now. And I have heard nothing of the rumor, in which case I'd treat it as one!
Herb, I see more people paying attention to accounting issues and balance sheets these days. Do you see the same trend? If so, is that a sign that "investors" are paying more attention to balance sheet fundamentals?
I think they're trying to. I will tell you the BIG investors will start paying close attention because of Reg FD. They won't be able to rely on being spoon-fed by the company anymore. Fundamentals will matter. I think events of the past four months, with SO many earnings disappointments, show that in the end the balance sheet cannot be ignored.
Any thoughts on B2B? At the beginning of this year those companies held the map to the holy grail then they got clocked and now the "leaders" like Ariba have made something of a comeback.
I avoided this whole B2B thing, and I'm not about to start now. Like every aspect of the Internet, the strong will survive and prosper. Can't say which ones, however, it'll be. Again, that's my buddy Lashinky's territory. They ought to get him here to handle the B2B stuff. In fact, one day we should join forces and do a chat together. I'd like that. He's far more diplomatic and thoughtful! (And speaking of a legend in his own mind....!)
Herb - What are your thoughts on oil? I'm starting to believe that latest move down is a dip, rather than a break in trend. The Peace process does not look promising.
As I wrote in
not that long ago anybody who is yearning for the days of cheap (in the teens) oil will have to keep yearning. It's very unlikely those days will return anytime soon, if ever again. I agree with you on the Mideast, though I continue to hope for a mediated resolve.
Herb, What do you think about how SFX got out of the "troubles" you reported last year ?
The ultimate exit strategy to sell themselves! That's always the risk to the bears/shortsellers. But in this case quite a few shorts went into Clear Channel, or so they tell me, and many were rewarded!
Herb, thnx for all you do. What legal and/or moral liability do underwriters have with some of the IPOs from Feb/Mar that quickly fell under price (e.g. pets.com and azx) will we ever see class action suits against underwriters who sell into bubble markets, such as those against the tobacco companies...perhaps w/the amazon eurobonds....your thoughts?
I"m not sure there is any liability. If I am correct there is specific language that lets the underwriters off the hook. A rule of thumb, though is that when the IPO market gets the hottest, and when the second and third players in an industry come public, the quality goes down. And the underwriters, eager to get the fees, do much less due diligence than they should.
Herb, looks like the Conseco story is heating up again?? any thoughts?
In my talks with the shorts they continue to believe this company's common shareholders will not make out like bandits (which is why they remain short.)
Herb, did you call me a legend in my own mind? Why?
Because you are! But so am I! Got to keep our feet firmly planted, if ya know what I mean!
What do you think of big companies like GE "massaging" their earnings, i.e. reporting constant EPS growth while their cashflow is all over the place. Do you think it is alright as long as the long-term growth trend is still intact?
I don't ever think it's right and for some reason GE has escaped scrutiny because of Jack Welch. The minute he leaves I think the company becomes fair game.
Any thoughts on when LOR or QCOM or any other GSTRF backers will financially write GSTRF losses off?
No. It appears Qualcomm is hanging tough as a last resort to protect its interests. Will be interesting to see what impact Globalstar's latest round of ads produces.
How has the MANU crowd reacted to your article?
No much, interestingly. In fact, there was no Hostile React-O-Meter. I was disappointed. That said, I did hear from one very good and very savvy trader who doesn't now own the stock but did and who believes it is a fabulous company. I also heard from an industry analyst (from a research firm, not brokerage firm) who believes the same.
Their belief is that the accounting issues aren't important. I think accounting issues are ALWAYS important. No matter how trivial.
Herb, I'm a big fan of the wireless web. Is the future here yet? Any stocks you like/dislike?
It is not here yet because I don't have it and until I do I will say it remains a concept rather than a true investment. Seriously, I don't watch the space so can't help you on this one.
No, you're a legend in my mind, that's all.
That's Adam, again, folks. He's da man. Should we get him here on a chat with me. Or on his own? Let's hear it from the crowd. Adam, the clap O-Meter is going out of control, outta control, I tell ya.
Do you find that all the time you spend talking to the shorts affects your objectiveness?
I'm not trying to be objective, I'm trying to tell the other side of the story. I'm trying to point out that there is another side to the story that more often than not you should pay attention to. And in case you didn't notice, I do talk to longs, too. What I find so fascinating is that nobody would ask whether my objectiveness has been clouded if all I did was talk to longs!
Thanks for a great hour Herb, any final thoughts?
It was a pleasure to be here and my only thought for the day is that if you haven't already done so do what I'm going to do in two hours (exit polls or no exit polls) make sure you vote!
Thanks for joining us for another great RealMoney chat. Be sure to log in tomorrow at 5 p.m. EST when we have Jim Seymour answering your post electoral questions. Have a good night and don't forget to go out and vote.